Portage panel wants progress report on audit compliance

If members of the Portage Common Council’s Administration and Finance Committee have their way, Monday’s monthly meeting won’t be the last time they talk about the city’s latest audit.

It was, on the whole, a good audit, according to Vasvi Yoshi, who handles municipal audits for the Madison-based Baker Tilly. The in-depth look at the city’s finances for 2017, she said, earned a “clean” opinion from the auditor, the best possible.

But the audit also included a finding of deficiencies in internal controls of the city’s finances and financial reporting — something that also was pointed out in last year’s audit.

Committee Chairman Dennis Nachreiner said it could be a challenge to address the concern without hiring more employees to oversee the city’s financial transactions.

“There can be a point of no return here,” he said. “If we need to hire four more people to do what they want us to do, we can’t afford that.”

Committee member Bill Kutzke said the city has made progress in addressing the controls, with the recent installation of new financial software.

Nachreiner suggested the committee’s agenda include, at least quarterly, an update on what city officials are doing to address the concerns raised in the audit.

The concerns aren’t uncommon, said City Administrator Shawn Murphy.

When the panel reviewed the audit of 2016 finances in August, Baker Tilly auditor Dennis Rader also pointed out deficiencies in internal controls, but noted that such deficiencies exist, to some degree, in about 90 percent of their auditing clients, because cities don’t have enough money to hire the people that would be needed in their accounting departments to segregate the duties.

“You aren’t going to be able to solve everything in one year,” Yoshi said.

Cities are not alone in facing challenges of establishing strong internal controls of finances.

In 2012, Columbia County department heads heard a presentation from Comptroller Lois Schepp about the dangers of having just one person, or just a few, controlling the financial transactions of a government body. Schepp cited an egregious case of a city comptroller in Illinois who pleaded guilty to embezzling, over a 20-year period, about $53 million. She could do this, Schepp said, because she was well-liked and trusted, and because the city did not have anyone but her overseeing its finances.

There were several bright spots in the city of Portage’s most recent audit. For example:

The city is not running out of money. Assets and deferred expenditures exceeded liabilities and deferred income at the end of 2017.

The fund balance at the end of 2017, more than $7.9 million, exceeds the ending fund balance of the previous year by more than $2 million.

The general fund’s unassigned fund balance — money that is unspent and not earmarked for a specific purpose — topped $2.3 million, and accounts for about 32 percent of general fund expenditures. That’s well within the city’s guidelines, which call for maintaining at least 25 percent of the city’s operating budget in reserves.

The general fund’s unassigned balance was still smaller than the about $4 million of the previous year, but that’s partly because city officials opted to dip into reserves to pay down some debts, rather than borrowing and repaying the debt with property tax revenues. The debts being paid with reserves this year include employee post-retirement benefits, roof replacement and remodeling of some park buildings.

Taxes account for more than half of the city’s revenue, 51 percent, followed by 18 percent from intergovernmental payments, 14 percent from operating grants and contributions, 9 percent from public charges for services and 8 percent from capital grants and contributions and other revenues.

Public works accounts for the largest share of city expenses, 36 percent, followed closely by 35 percent for public safety (including police, fire and emergency medical service).

The city has come a long way since a less-than-stellar audit of its 2012 finances, in which several problems related to bookkeeping were pointed out — lax reconciliation of bank balances, money transfers not recorded in a timely fashion and lack of up-to-date records of when the city acquired and disposed of equipment.

Murphy, who was then the interim city administrator, attributed this to a period when the city was short-staffed — and even then, he noted, there was no finding of any missing money or other problems with city’s coffers.